Program Operations Manual System (POMS)

PS 01810.025 Michigan

This opinion finds that a fiduciary deed granting certain life estates in real property to the claimant satisfies the requirements for both the Statute of Frauds and a deed under Michigan law. Therefore, the fiduciary deed created valid life estates under Michigan law, and possibly one or more easements, belonging to the claimant. All are countable resources except for her home. In addition, the claimant has potential sources of unearned income from two of the interests conveyed to her in the deed.

You asked for our assistance in making a resource determination with respect to a claimant’s potential life estates for SSI purposes. Specifically, you want to know whether a fiduciary deed granting certain life estates in real property to the claimant created valid life estates under Michigan law. For the reasons discussed below, we conclude that the deed created valid life estates, and possibly one or more easements, belonging to the claimant. All are countable resources except for her home. In addition, the claimant has potential sources of unearned income from two of the interests conveyed to her in the deed.

BACKGROUND

The fiduciary deed dated May, conveyed four parcels of real property owned by the estate of Charles to Mazurek Farms. Fiduciary Deed at p. 1. According to the deed, portions of three of the four parcels are subject to life estates granted to the claimant. These properties are:

That part of the North ½ of the Southwest ¼, Section 20, T4N, R6W, beginning at the West Quarter Corner, then running East ~ feet, then South ~~ Feet, then West ~ Feet, then North ~ Feet to the Point of Beginning. [Hereinafter Property 1]

For the Property Address: ~ ~, ~, Michigan, Southeast ¼, beginning at the South Quarter Corner, then running North ~ Feet, then East ~ Feet, then South ~ Feet, then West ~ Feet to the Point of Beginning, Section ~, T4N, R6W. [Hereinafter Property ~]

That part of the West ~ Acres of the Southwest ¼ Section ~~~~, beginning at the Southwest Corner of the Fractional Section ~, then running East ~~ Feet to the Point of the Beginning; then North ~ Feet, then East ~ Feet, then South ~~~ Feet, then West ~~ Feet, then South ~~ Feet, then West ~~ Feet to the Point of Beginning. [Hereinafter Property ~]

Fiduciary Deed at p. 2. The above three properties are subject to the following interests:

A. A life estate in favor of Charlotte in the residence with an address of ~. ~, ~, Michigan ~, currently occupied by Charlotte. [Hereinafter Interest A]

B. A life estate in favor or Charlotte for cutting firewood from the premises described in this Deed for her personal use. [Hereinafter Interest B]

C. A life estate in favor of Charlotte to use the barn space currently used by her to house livestock owned by Charlotte and situated on the premises described in this Deed. [Hereinafter Interest C] p

D. A life estate in favor of Charlotte to lease out the residence located at ~. ~ ~, ~, Michigan ~. 1 [Hereinafter Interest D]

E. A life estate in favor of Charlotte in the maple syrup production of the maple trees located behind the residence at ~. ~, ~, I ~~~ (at the corner of the property of the Southeast ¼ Section 17, T4N, R6W) and located on the premises described in this Deed. [Hereinafter Interest E]

Id.

II. Social Security Law and Policy

A resource is defined as: cash and any other personal or real property that an individual (or spouse, if any): (1) owns; (2) has the right, authority, or power to convert to cash (if not already cash); and (3) is not legally restricted from using for her support and maintenance. See 20 C.F.R. § 416.1201(a); POMS SI 01110.100B.1. To be eligible for SSI, an individual’s (and spouse’s, if any) countable resources must not exceed the statutory limit. See 20 C.F.R. § 416.1205.

Certain resources do not count against the statutory limit, i.e., they are excluded. See POMS SI 01110.210. As relevant here, under the home exclusion, an individual’s home is an excluded resource. See 20 C.F.R. § 416.1212; POMS SI 01130.100. A home is defined as property in which the individual has an ownership interest and that serves as the principal place of residence, including the shelter in which she lives, the land on which the shelter is located, and related buildings. See 20 C.F.R. § 416.1212(a); POMS SI 01130.100A.1. Conversely, real property that is not an individual’s home is a countable resource. See POMS SI 01110.200, SI 01110.210.

A life estate is an ownership interest in property, usually created through a deed or will or by operation of law, which confers upon one or more persons (grantees) certain rights in a property for their lifetimes or the life of some other person. See POMS SI 01110.515A.2.a. Unless the instrument establishing the life estate places restrictions on the rights of the life tenant, the life tenant has the right to possess, use, and obtain profits from the property and to sell her life estate interest. See POMS SI 01110.515B.1.a. Accordingly, a life estate in a home is an excluded resource, whereas a life estate in non-home real property is a countable resource. See id. The value of a life estate in non-home real property is determined under POMS SI 01140.110B.4 and SI 01140.120.

III. Michigan Law

Michigan recognizes life estates as one of five types of estates in lands. See Mich. Comp. Laws § 554.1. Under the Michigan Statute of Frauds, no interest in lands (other than a lease of one year or less) may be created, granted, assigned, surrendered, or declared except by operation of law, or by a deed or other conveyance in writing. See id. § 566.106. The writing must be signed by the person creating the interest. See id. Because a life estate is an interest in land, it must satisfy the Statue of Frauds, meaning that its existence must be established by a writing signed by the seller, grantor, or his agent. Under Michigan law, a conveyance of land, or of any interest therein, which is made by deed must be signed and sealed by the seller, grantor, or his agent, and acknowledged or proved and recorded. See Mich. Comp. Laws § 565.1. An acknowledgment may be taken by any judge, clerk of a court of record, or notary public within the state of Michigan. See id. § 565.8.

IV. Discussion

We believe that the fiduciary deed satisfies the requirements for both the Statute of Frauds and a deed under Michigan law. Specifically, the deed was signed by the personal representative of Charles’s estate. It was also notarized and subsequently recorded in Eaton County, Michigan. Thus, the deed created valid life estates under Michigan law, for at least three of the interests conveyed to the claimant – Interests A, C, and D.

With respect to Interest A, we believe that this life estate falls under the home exclusion, as the deed indicates that the claimant is living in that property. Therefore, it is an excluded resource. Interest D, on the other hand, is a life estate in non-home real property, so it is a countable resource. As such, Interest D’s value should be determined under POMS SI 01140.110B.4 and SI 01140.120.

With respect to Interest C, the deed is ambiguous as to where the “barn space” is located. If it is located on the claimant’s home property, then it is a related building which is considered part of the claimant’s home. See POMS SI 01130.100B.3.b. Thus, the claimant’s life estate in her home would include the “barn space.” If, however, the “barn space” is located on non-home property, then, like Interest D, it is a countable resource, and Interest C’s value should be determined under POMS SI 01140.110B.4 and SI 01140.120. We believe this interest would likely have little value.

Similarly, the exact locations of the trees for cutting firewood (Interest B) and the maple trees (Interest E) are unclear. With respect to Interest B, if the trees for cutting firewood are located on the claimant’s home property, then they are part of her life estate in her home and thus an excluded resource. If the trees are on non-home property, then Interest B, while called a life estate, more accurately reflects an easement that lasts for the claimant’s lifetime See POMS SI 01140.110A.3 (“An easement gives one party the right to use the land of another party for a special purpose.”); Black’s Law Dictionary (9th ed. 2009) (accord). Accordingly, the easement should be treated as real property and thus a countable resource. See POMS SI 01140.110B.1. Because the easement only lasts for the claimant’s lifetime, its value should be determined under POMS SI 01140.110B.4 and SI 01140.120. We believe this easement is a resource with no value, as the firewood is only for the claimant’s personal use.

Likewise, with respect to Interest E, if the land on which the maple trees are located is part of the claimant’s home property, then her life estate in her home (which is an excluded resource) would encompass the maple trees, allowing her to use and obtain profits from them. See POMS SI 01110.515B.1.a. But if the maple trees are located on non-home property, then Interest E is also an easement that lasts for the claimant’s lifetime and thus a countable resource. See POMS SI 01140.110A.3. Its value should be determined under POMS SI 01140.110B.4 and SI 01140.120. Depending on the magnitude of the maple syrup production, the claimant’s easement may or may not have value.

We further note that any rent the claimant receives from leasing the property at 11814 ~ ~ (Interest D) would constitute income to the claimant. See 20 C.F.R. § 416.1121(d); POMS SI 00830.505. As well, if the maple syrup production (Interest E) is run as a business (and not merely for personal use), any profits she receives from such maple syrup production would also constitute income to the claimant. See 20 C.F.R. § 416.1121(c); POMS SI 00830.510.

Our findings regarding Interests A-E are summarized in the following chart:

Description

Interest

Resource

Income

A. ~ ~. ~~

residence

Life estate

Resource – home exclusion

B. Cutting trees for

firewood

Home property: life estate

Resource – home exclusion

Non-home property: easement

Resource – countable (no value)

C. Barn space

Life estate

Home property: resource – home exclusion

Non-home property: resource – countable (little value)

D. ~ ~ ~

~ residence

Life estate

Resource – countable (some value)

Any rent from leasing residence

E. Maple syrup

production

Home property: life estate

Resource – home exclusion

Any profits from maple syrup production

Non-home property: easement

Resource – countable (unknown value)

V. Conclusion

For the reasons discussed above, we conclude that the claimant owns multiple life estates and possible easements. All are countable resources except for her home. The only countable resource that appears to have significant value is the life estate in the residence at ~ ~ ~ (Interest D). In addition, the claimant may potentially receive unearned income in the form of rent from leasing that residence and profits from maple syrup production. We recommend that you further develop this case as appropriate.

This opinion analyzes a probate court order that provided non-home real property to an SSI beneficiary, and the beneficiary's subsequent transfer of the property. In June, 2000 a probate court order was executed resulting in an SSI beneficiary receiving sole ownership of one piece of non-home real property (Property A) and a one-third interest in another (Property B). The beneficiary entered into a land contract agreement with a third party for property A in October, 2001 and property B was sold on the open market in July, 2004. In January, 2004 the beneficiary established a living trust with the intention of placing property A in the trust for the benefit of two of the beneficiary's relatives. Property A is determined to be the beneficiary's resource until the land contract was issued. At that time, the land contract becomes a resource to the beneficiary in the amount of the balance due. The beneficiary's one-third interest in property B is also determined to be a resource. The transfer of property A into the trust is determined to be a transfer for less than fair market value since no compensation was received. Additionally, the beneficiary did not receive one-third of the proceeds from the sale of property B, resulting in another transfer for less than fair market value.

We have reviewed the documents that you provided and concluded that, for the reasons stated below, the house in Saginaw, Michigan, as well as his one-third interest in the real property in White Cloud, Michigan, should be considered a resource of John. We further conclude that Mr. E~ later disposed of these resources for less than fair market value.

BACKGROUND

According to the facts provided, a probate court order was executed in June 2000 due to the death of John's brother, Thomas. The order provided that the house in Saginaw, Michigan be transferred and deeded to John and the real property in White Cloud, Michigan, be transferred and deeded to John and Thomas's two minor children as joint tenants with full rights of survivorship.

In July 2000, Mr. E~ signed a notarized statement indicating that the Saginaw house will pay all the expenses for the house in White Cloud, including taxes, insurance and maintenance expenses. At that time, Mr. E~ was renting the Saginaw house for $300 per month. He further stated that he was "just the overseer" of the two properties for his brother's estate.

When the Agency became aware of this situation, Mr. E~ was notified that he was no longer eligible for SSI due to excess resources because of his sole ownership of the Saginaw house (Mr. E~ also owned the home in which he lived in Weidman, Michigan). Mr. E~ insisted that he never benefited or profited from either the Saginaw or White Cloud properties and claimed they were deeded to him because his niece and nephew were minors.

In October 2001, Mr. E~ entered into a land contract agreement for the property in Saginaw in the amount of $14,000. He alleged that the buyer continued to make monthly payments of $300, which paid the expenses of the White Cloud home. Later, Mr. E~ alleged that the money went towards renovations and back taxes on the Saginaw property and that he "lost" money on the arrangement.

Mr. E~'s attorney informed the Agency that he believed that the Saginaw house being deeded in Mr. E~'s name was incorrect. He was unable to discuss the matter with the attorney or attorneys involved in the probate matter. Mr. E~'s attorney then prepared a living trust agreement, in January 2004 (about three and one-half years after the probate court order was entered). The living trust agreement names Mr. E~ as the settlor and initial trustee, refers to the probate court order and provides that the intent of the conveyances of the properties was for Mr. E~ to act as trustee for the benefit of his brother's two children and manage the properties. It also provided that the Saginaw property was sold pursuant to a land contract and had been deeded to Mr. E~ solely for the purpose of collecting the proceeds to maintain the White Cloud house. The living trust agreement also indicated that it was not intended that Mr. E~ have any beneficial interest in the Saginaw property. It further provides that the agreement is intended to be irrevocable and for the sole purpose of transferring the Saginaw property to the trust intending to effectuate the actual practice of the parties since the date of the court order of June 2000.

In July 2004, the buyer of the Saginaw house allegedly stopped making the monthly land contract payment. The last monthly payment was received in early July 2004.

Also in July 2004, the White Cloud house was sold for $60,000.00. Apparently, Mr. E~'s niece and nephew were no longer minors and decided to sell the home. Mr. E~ and his niece and nephew signed the Seller's Statement and Warranty Deed, however, Substitute Form 1099S and copies of checks show that the proceeds of the sale were issued only to Mr. E~'s niece and nephew.

Finally, in February 2005, the buyer of the Saginaw house fulfilled the land contract and the agreed payoff amount was $6000. According to an attorney, a check made out to John was sent directly to him. He deducted attorney and title insurance fees, which left a balance of $5,090, and sent a check in this amount to Mr. E~'s nephew, Thomas, Jr.

DISCUSSION

A. The Saginaw Property.

For SSI purposes, "resource means cash or other liquid assets or any real or personal property that an individual (or spouse, if any) owns and could convert to cash to be used for his or her support or maintenance." 20 C.F.R. § 416.1201(a). Generally, real property that is not a beneficiary's principal place of residence is a countable resource. POMS SI 01130.100A.6.a. It is our understanding that Mr. E~'s niece and nephew did not reside in either property. Therefore, from the time the Saginaw house was transferred and deeded to Mr. E~ until October 12, 2001, when he entered into a land contract agreement, it should be considered a resource of Mr. E~'s as it was transferred and deeded solely to him. Further, the $300 monthly rent payment constitutes income belonging to Mr. E~. POMS SI 00830.505 (rent is a payment which an individual receives for the use of real or personal property). However, since Mr. E~ used these payments for maintaining the Saginaw property and/or the White Cloud property, the rental payments were offset by ordinary and necessary expenses, such that Mr. E~ did not have any net rental income. See POMS SI 00830.505.

As stated above, in October 2001, Mr. E~ entered into a land contract agreement for the Saginaw house for $14,000. POMS SI 01140.300B.2. The land contract is a resource to the seller, who is the owner of the agreement. POMS SI 01140.300.C.1. The resource value of a land contract (to the Seller) is assumed to be its outstanding principal balance, unless the individual provides evidence to the contrary. POMS SI 01140.300.C.3. Here, since Mr. E~ and the buyer of the Saginaw house ultimately agreed to a contract payoff amount of $6,000, we believe that the land contract is a resource which should be valued at $6,000 belonging to Mr. E~ but the Saginaw house is no longer a resource as of the date of the contract. Any principal payments on the land contract would be a conversion of a resource, and interest payments would be income. POMS SI 01140.300.C.1.

In January 2004, Mr. E~ transferred the land contract for the Saginaw house into a living trust. The trust agreement names Mr. E~ as settlor and initial trustee and refers to the probate court order and provides that the intent of the conveyances of the properties was for Mr. E~ to act as trustee for the benefit of his brother's two children and manage the properties. It also provided that the Saginaw property was sold pursuant to a land contract and had been deeded to Mr. E~ solely for the purpose of collecting the proceeds to maintain the White Cloud house. The living trust agreement also indicated that it was not intended that Mr. E~ have any beneficial interest in the Saginaw property. It further provides that the agreement is intended to be irrevocable and for the sole purpose of transferring the Saginaw property to the trust intending to effectuate the actual practice of the parties since the date of the court order of June 2000. The trust agreement also provided that any sums left over after payment of the costs associated with the White Cloud property shall be held in trust for Mr. E~'s niece and nephew and paid in equal shares upon their attaining the age of twenty-five.

Although Mr. E~ claimed that he had always held the Saginaw property for the benefit of his niece and nephew, we have been informed that he later acknowledged that he and his deceased brother never discussed that the decedent would leave the property to Mr. E~ and he was not even sure that the decedent wished for him to receive the property. Therefore, from the time of the June 2000 probate court order through the creation of the living trust agreement, the Saginaw property, and the subsequent land contract, were resources belonging to Mr. E~.

Mr. E~'s transfer of the Saginaw into the trust was a transfer for less than fair market value, as Mr. E~ did not appear to receive anything in exchange for the home. POMS SI 01150.001, et. seq. We note that the exception in POMS SI 01150.125 (Exceptions - transfers for purposes other than to obtain SSI) would not be applicable since the trust was created in apparent response to an Agency notification of excess resources.

B. The White Cloud Property.

The June 2000 probate court order ordered that the real property in White Cloud be transferred and deeded to Mr. E~ and Thomas's two minor children as joint tenants with full rights of survivorship. We conclude that Mr. E~'s one-third interest in the White Cloud property was a resource. Based upon information provided to us, it is our understanding that the White Cloud property was a "hunting and fishing cabin" and Mr. E~'s niece and nephew did not reside there. Since Mr. E~'s niece and nephew were not living in the house in White Cloud, Mr. E~'s one-third interest was a resource. POMS SI CH101110.510.

The White Cloud property was sold in July 2004 and, apparently, Mr. E~'s niece and nephew received all the proceeds from the sale. This constitutes another transfer for less than fair market value, as Mr. E~, as one-third owner of the White Cloud property, was entitled to one-third of the proceeds from the sale.

CONCLUSION

In sum, we conclude that the Saginaw house and land contract through the date of the January 21, 2004, living trust agreement, as well as the one-third interest in the White Cloud house were resources belonging to Mr. E~. Further, Mr. E~'s transfer of the Saginaw land contract into the trust constituted a transfer for less than fair market value. Finally, the sale of the White Cloud property also constituted a transfer for less than fair market value, as Mr. E~ did not receive any of the sale proceeds despite having a one-third interest in the property.

The issue is whether the "life lease" retained by a couple constitutes a life estate interest in property under Michigan state law, and if the property is a countable resource for SSI purposes. In 1989, a couple executed a quitclaim deed. They conveyed Michigan property to themselves, and two other individuals as joint tenants with a right of survivorship. In a separate clause, the couple retained, individually and jointly, a life lease in the property.

Under common law, a life estate is considered an ownership interest in property. The holder of a life estate in property has the right to possess, use, and enjoy the property for his lifetime or that of another person, notwithstanding the fact that he does not have title to the property. A life estate may be created by deed, will, lease or other device, with or without a stipulation for the payment of rent. At common law and, for general purposes, under Michigan law, a leasehold is a mere personal property interest, or contractual right to enter the premises, as opposed to an interest in the real estate itself. A mere lessee, as opposed to a life tenant, would have no ownership interest within the meaning of SSA's regulations. The Michigan Supreme Court found that a document conveying a lease for life created a freehold estate even though the conveyance stipulated that the life tenant pay rent. Further, the court construed the life lease as a life estate despite the fact that Michigan statutes retained the common law classification of leaseholds as personal, rather than real, property. The court's holding that a life lease created a freehold estate means that in Michigan, a life lease creates a life estate. Thus, the life lease retained by the couple is properly considered to be a life estate under Michigan State law. Furthermore, the couple could properly retain the life estate in property at the same time they conveyed the property in joint tenancy with a right of survivorship. The Michigan Supreme Court has held that a husband and wife may convey land but reserve the present use of the subject land to themselves because since two can convey the land they can in conveying it impose such limitations as they please. The deed that the couple executed reserving a lifetime lease to themselves is, therefore, valid under Michigan law. Thus, both common law principles and Michigan law support a finding that the couple's lifetime lease constitutes a life estate interest for the purpose of computing resources.

Although the couple under Michigan State law retained a life estate in the property, the home would nevertheless be a countable resource. At the time of the property transfer, the couple resided on the property, However, the couple currently reside in Nebraska and do not intend to return to Michigan. There is no indication that either of the other two joint tenants reside on the property. Both common law principles and Michigan State law justify finding the couple's life lease to be a life estate for SSI income and resource determination purposes. Because the couple have expressed on intention of returning to Michigan, the property should be a countable resource.

You inquired whether the "life lease" retained by Clifford and Madeline, a married couple, constitutes a life estate interest in property under Michigan state law. In January 1989, the couple executed a quitclaim deed. They conveyed the Michigan property to Clifford, Madeline, Joy, and Dorothy as joint tenants with a right of survivorship. In a separate clause, the S~s retained, individually and jointly, a life lease in the property./ We conclude that the S~s retained a life estate in Michigan property.

The Social Security Act (the "Act") provides that every aged, blind, or disabled individual who is determined to be eligible on the basis of his income and resources shall be paid Supplemental Security Income (SSI) benefits by the Secretary of Health and Human Services. 42 U.S.C. § 1381a. The Act specifies those elements that are counted toward income, excluded from income, and excluded from resources in determining eligibility. 42 U.S.C. §§ 1382a, 1382b.

Relevant to the current inquiry, both the Act and the regulations provide that a home is excluded in determining the resources of an individual (and his eligible spouse, if any). 42 U.S.C. § 1382b; 20 C.F.R. § 416.1212. A home is "any property in which an individual ... has an ownership interest and which serves as the individual's principal place of residence." 20 C.F.R. § 416.1212(a). Whether the home is a countable resource, therefore, depends upon two factors: first, whether the individual has an ownership interest in the property and second, whether the home serves as the individual's principal place of residence.

The S~s Have An Ownership Interest In Michigan Property.

Your inquiry focuses upon whether the S~s' life lease constitutes a life estate in Michigan. Under the common law, a life estate is considered an ownership interest in property. The holder of a life estate in property has the right to possess, use, and enjoy the property for his lifetime or that of another person, notwithstanding the fact that he does not have title to the property. 51 Am. Jur. 2d Life Tenants and Remaindermen § 32 (1970). A life estate may be created by deed, will, lease, or other device, with or without a stipulation for the payment of rent. 28 Am. Jur. 2d Estates § 61 (1966).

At common law and, for general purposes, under Michigan law, a leasehold is a mere personal property interest, or contractual right to enter the premises, as opposed to an interest in the real estate itself./ 28 Am. Jur. 2d, supra at §§ 8, 56; M.C.L.A. § 554.5 (West 1988). In other words, a mere lessee, as opposed to a life tenant, would have no ownership interest within the meaning of SSA's regulations. Louise F~, ~, RA V (Swanson) to RC SSA V (Moleski), 2/2/87.

In Bakker v. Fellows, 117 N.W. 52 (Mich. 1908), the Michigan Supreme Court found that a document conveying a lease for life created a freehold estate even though the conveyance stipulated that the life tenant pay rent. Further, the B~ court construed the life lease as a life estate despite the fact that Michigan statutes retained the common law classification of leaseholds as personal, rather than real, property. M.C.L.A. § 554.5 (West 1988). Thus, the B~ court's holding that a life lease created a freehold estate means that in Michigan, a life lease creates a life estate. Thus, the life lease retained by the S~s is properly considered to be a life estate under Michigan state law.

Furthermore, the S~s could properly retain the life estate in property at the same time that they conveyed the property in joint tenancy with a right of survivorship. The Michigan Supreme Court has held that a husband and wife may convey land but reserve the present use of the subject land to themselves because, "since the two can convey the [land], they can in conveying it impose such limitations as they please." Derham v. Hovey, 161 N.W. 883, 884 (Mich. 1917). The deed that Clifford and Madeline executed reserving a lifetime lease to themselves is, therefore, valid under Michigan law./

In our opinion, treating the S~s' lifetime lease as personal property would defeat the purpose of the relevant SSI statutes and regulations because in substance, the S~s' interest is more akin to a life estate or real property interest than to a leasehold interest. Thus, we conclude that both common law principles and Michigan law support a finding that the S~s' lifetime lease constitutes a life estate interest for the purpose of computing resources.

The S~s Have No Intention Of Returning To Michigan.

Although we conclude that under Michigan state law, the S~s retained a life estate in the property; the home would nevertheless be includable in determining resources. As a general rule, a home is excludable in determining resources. But, for the home to be excludable, an individual must not only retain an ownership interest in the property, but the property must serve as the individual's principal place of residence. A home is "any property in which an individual ... has an ownership interest and which serves as the individual's principal place of residence." 20 C.F.R. § 416.1212(a). Even though the S~s have the ownership interest in the property, it does not serve as the S~s' principal place of residence.

Your cover memorandum indicates that at the time of the property transfer, the S~s resided on the property; however, the S~s currently reside in Nebraska and do not intend to return to Michigan. The regulations provide that if the individual moves out of the home "without the intent to return," the home becomes a countable resource because "it is no longer the individual's principal place of residence." 20 C.F.R. § 416.1212(c). Thus, under the regulations, the S~s' Michigan property is not excludable as a home.

The Program Operations Manual System (POMS) states that:

An individual's principal place of residence is the dwelling the individual considers his or her established or principal home and to which, if absent, he or she intends to return.

POMS SI 01130.100A.3. (7/90). The property ceases to be the principal place of residence and ceases to be excludable as the home "as of the date that the individual, having left it, does not intend to return to it." POMS SI 01130.100A.6.a. (7/90). Because the S~s do not use the home as their principal place of residence and because they have expressed no intent to return, the property is not excludable as a home.

Although the POMS provides exceptions to this general rule, no exception appears applicable. The POMS states that even if the individual leaves the home without the intent to return, the property remains an excludable resource for as long as (a) a spouse or dependent relative of the individual continues to live there while the individual is institutionalized; or (b) its sale would cause undue hardship, due to loss of housing, to a co-owner of the property. POMS SI 01130.100A.6.b. (7/90). The S~s have presented no claim of being institutionalized. Furthermore, there is no indication that either Joy or Dorothy resides on the property. The deed specifies different addresses for both women. The POMS states that undue hardship would result if the co-owner used the property as his or her principal place of residence, would have to move if the property was sold, and had no other readily available housing. POMS SI 01130.130A. (7/90). Because there is no indication in these facts that undue hardship would occur, this exception does not apply. Thus, no exception to the general rule applies.

In conclusion, it is our opinion that both common law principles and Michigan state law justify finding the S~s' life lease to be a life estate for SSI income and resource determination purposes. Because the S~s have expressed no intention of returning to Michigan, the property should nevertheless be a countable resource.

This opinion concerns a conservatorship account in the State of Michigan and whether the account is a countable resource in the SSI program. Michigan State law gives probate courts legal jurisdiction over conservatorship accounts. In this case, the probate court denied use of the conservatorship account funds for the eligible individual's support and maintenance. Because the court has jurisdiction over the conservatorship account and has denied use of the funds for support and maintenance, the eligible individual does not have access to the account and it is not countable as a resource for SSI purposes.

You asked for a legal opinion concerning whether funds held in a restricted account constitute a countable resource to Jose (Jose) for SSI purposes. Based on the facts as we understand them, we conclude that the account is not available for Jose's care and maintenance, and, therefore, should not be considered a resource to him.

Background

At some point prior to January 1, 2000, funds were deposited in Putnam Investments, in the name of Susan , Conservator, on behalf of Jose. By March 31, 2000, the amount in the Putnam Investment Fund was $7,307.12. On June 7, 2000, Juan (Juan) and Susan (Susan) were appointed co-conservators of Jose's estate by the Kent County, Michigan, Probate Court. The Letter of Conservatorship states that Juan and Susan were granted power to take possession, collect, preserve, manage, and dispose of Jose's property and to perform all acts permitted or required by statute, court rule, and orders of the probate court, unless limited by the Letter of Conservatorship. The Letter of Conservatorship included a restriction that Juan and Susan were responsible for the preservation of Jose's assets and "shall not dispose of any asset, make any withdrawal of funds or make any disbursements of the minor's assets without a specific court order authorizing the transaction."

On June 17, 2000, Juan and Susan applied to the Probate Court to release funds from the Putnam Investment "to support" Jose. The same Judge that signed the Letter of Conservatorship denied their request and explained that the funds belonged solely to Jose and could not be used to offset a "parent's obligation to support Jose."

Discussion

The primary purpose of the Supplemental Security Income program is to assure a minimal level of income to low-income aged, blind, and disabled persons who have income and resources below an amount established by the Federal government. 20 C.F.R. § 416.110. Under this program, if the value of an individual's resources exceeds a resource limitation, that person is not eligible for SSI benefits. 20 C.F.R. §§ 416.110(a). For an individual such as Jose, that resource limit is $2,000. 20 C.F.R. § 416.1205.

A resource, for SSI purposes, includes assets that the individual owns and could convert to cash to be used for his support and maintenance. 20 C.F.R. § 416.1201(a). When a fiduciary (such as a guardian or conservator) manages and controls funds owned by an SSI recipient, those funds are considered to be available to the recipient for the recipient's support and maintenance, absent a legal restriction on the use of or access to the funds. POMS SI 01140.215. The funds in this case are held in a conservatorship account, also known as a "blocked" account, in that the conservator may access funds held on behalf of Jose only with the permission of the court.

The fact that Juan and Susan are required to petition the court for release of funds is not dispositive of the issue whether the funds in the restricted account can be considered Jose's resource for SSI purposes. The regulations provide that funds held in a financial institution account are counted as a resource if the individual owns the account and can use the funds for his support and maintenance. 20 C.F.R. § 416.1208(a). Although neither the Social Security Act nor the implementing regulations specifically address the issue of conservatorship accounts, SSA's Program Operations Manual System (POMS) describes the circumstances under which the agency will consider funds in a conservatorship account to be an individual's resource. POMS SI 01120.010(C)(3); POMS SI 01140.215. These POMS sections provide that the Agency should consider State law, and establishes the following policy for determining whether the account is a resource:

If State law requires that funds in a conservatorship account be made available for the care and maintenance of an individual, we assume, absent evidence to the contrary, that funds in such an account are available for the individual's support and maintenance and are, therefore, that individual's resource.

POMS SI 01120.010(C)(3); POMS SI 01140.215(B)(1). The POMS also states that even though an individual must petition the court for withdrawal of the account funds, the funds may be considered available for the individual's support and maintenance. According to POMS SI 01140.215(B)(3), in deciding whether the account funds are available for support and maintenance, the Agency should review the history of petitions for withdrawal of the account funds, and whether the court approved or denied those petitions. According to the POMS, if a denial by the court appears to be an exception rather than the rule, the funds may be determined to be a resource for SSI purposes. POMS SI 00140.215(B)(3).

In this case, the Probate Court specifically rejected the application of Juan and Susan for release of funds to be used for Jose's support. Under Michigan law, the Probate Court has exclusive legal and equitable jurisdiction over conservatorship proceedings. Michigan Complied Law Annotated (M.C.L.A.) § 700.1302(c). If challenged, the Probate Court's decision would be reviewed under an abuse of discretion standard. Matter of Estate of R~, 360 N.W. 2d 587 (Mich. App. 1984). Based on the facts presented in this situation, there is no reason to believe that the Probate Court's denial was anything other than a valid exercise of its discretion that would be upheld on appeal. For example, in White v. Apfel, 167 F.3d 369 (1999), the Seventh Circuit Court of Appeals addressed a similar question when a disabled child's mother petitioned the court for funds for support but the probate court denied her petition. The Seventh Circuit found that the probate court's denial rebutted the Agency's presumption that funds in a conservatorship account would be available for support. W~, 167 F.2d at 375. Although our research did not find a Michigan case exactly on point on this issue, the logic applied in the Seventh Circuit would likely be applied to the Michigan probate law and, in our opinion, a Michigan appellate court would likely find that Jose was unable to access the funds in the conservatorship account for his own care and maintenance.

Conclusion

Jose has funds in a restricted (conservatorship) account. The Probate Court denied access to those funds for Jose's support and this denial rebuts the Agency's policy that funds in a conservatorship account are considered a resource. For the above reasons, we conclude that Jose's conservatorship account is not a countable resource for SSI purposes.

This issue concerns whether funds held in a blocked account by a conservator as a fiduciary for a minor beneficiary are accessible for support and maintenance of the beneficiary. Under Michigan law, such funds are generally presumed to be available for the beneficiary's support and maintenance. However, if the court order specifically precludes the use of such funds for the beneficiary's support and maintenance, the presumption of availability is nullified. The funds, therefore, are not resources of the beneficiary for SSI purposes.

By memorandum dated September 14, 1990, you asked us for an opinion on whether funds held by a conservator as fiduciary for a minor SSI beneficiary, Richard, ~, are accessible for support and maintenance of the beneficiary. In our opinion, even though such funds are generally presumed to be available under Michigan law, in this particular case they are not accessible for the beneficiary's support or maintenance because the specific court orders explicitly preclude such use and thereby nullify any presumption. The funds are therefore not resources of the beneficiary for SSI purposes.

In this case, the Oakland County Probate Court has issued Letters of Authority under which the minor beneficiary's mother has been appointed conservator of the beneficiary's estate. The estate reportedly includes funds of some $11,334 held in a conserved account. Under the terms of the Letters of Authority, "Ownership of the funds must be in the conservator as fiduciary for the minor." In addition, any funds held in such a conserved account may not be used without prior written authority of the court, and funds may not be withdrawn until the minor becomes 18 years of age or until further order of the court. You have further advised us that the court restricted the money from being used "for the care and maintenance of the ward(s) and other family members."

Citing POMS SI 01120.110, we have previously advised you that where a fiduciary manages and controls funds owned by an SSI recipient, those funds are still considered available to the recipient for his support and maintenance absent a legal restriction on the use of or access to the funds by the payee or guardian. OGC-V (Lowes) to SSA-V, ARC-POS (Washington), "Blocked Accounts as SSI Resources — Action," August 3, 1989. An account is considered "blocked" where a state permits a guardian or payee to access funds held on behalf of another only with the permission of the court. Since under Michigan law a ward's funds are to be used for his support and maintenance, the funds in a "blocked" account are presumed to be accessible by petition and are resources. Id.; POMS 01120.210D.1 (Feb. 1989); and the regional POMS supplement at SI R01120.210.

However, we have also previously advised you that the presumption of availability can be nullified in several circumstances. For example, there may be a court order disapproving all or part of the expenditures made by the guardian on behalf of the ward, thereby constituting a legal restriction on the use of the funds expended that would nullify any presumption of availability. We therefore advised that the order establishing a guardianship may have to be reviewed to determine whether the court has imposed any restrictions on the guardian or ward's access to funds in a "blocked" account. Id.; and the regional POMS supplement at SI R01120.210. Accord, POMS 01120.210D.2 (Feb. 1989), which states that "The assumption of an owner's access to funds is nullified by evidence of a legal restriction against such access."

Application of the foregoing principles to this case leads us to conclude that any presumed access to the conserved funds under Michigan law is nullified by the actual terms of the court orders establishing the conservatorship involved herein. The funds held in this conserved account are not accessible to the conservator for the support and maintenance of the SSI beneficiary, and thus are not resources of the SSI beneficiary.

Follow:

External Link Disclaimer

You are exiting the Social Security Administration's website.

SSA cannot attest to the accuracy of information provided by such websites. If we provide a link to such a website, this does not constitute an endorsement by SSA or any of its employees of the information or products presented on the non-SSA website.

Also, such websites are not within our control and may not follow the same privacy, security or accessibility policies. Once you visit such a website you are subject to the policies of that site.